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Europe Unites To Remove Russian Banks From Swift

Europe Unites To Remove Russian Banks From Swift

EU countries such as Germany, Italy, and Hungary, initially expressed doubts about cutting off Russian banks in Swift due to their close economic and financial ties with Russia. But as international pressure mounted over the weekend — especially from Ukrainian President Volodymyr Zelenskyy, who called on EU countries to do more – on Saturday, the EU, the US, Canada, and the UK agreed to remove a number of Russian banks from -Swift.

Announcing the ban, European Commission president Ursula von der Leyen said, “Disconnecting banks will prevent them from carrying out most of their international financial activities and effectively prevent imports and exports to Russia.” The EU will also suspend transactions with the Central Bank of Russia, von der Leyen said, in an attempt to prevent it from destroying its military assets. “All of these measures will seriously undermine Putin’s ability to fund his war,” said von der Leyen. “They will have a negative impact on the economy.”

One of the sharpest U-turns over the weekend comes from Germany, relying on Russia for 55% of its gas. Not only did it agree to the SWIFT ban, but in an extraordinary session of the German parliament on Sunday, German chancellor Olaf Scholz announced that Germany would significantly increase defense spending by 100 billion euros ($ 112.7bn) or more than 2% of GDP, unprecedented before. a country, which has given only 1.2% –1.3% of its defense GDP in recent years.

Details of how the Swift ban on Russian-sanctioned banks will work were still being considered on Sunday. Speaking of technology, it is unlikely to be easy as more than 300 Russian financial institutions are connected to Swift, which processes an average of 40 million financial messages per day related to payments and other transactions. However, Swift has no involvement or control over the financial transactions contained in the messages of its member banks.

Europe Unites To Remove Russian Banks From Swift – For that reason, some believe that Swift may not be the most effective option when it comes to hitting Russia when it hurts the most, economically.

“Oh, how good and bad they treated you in the SWIFT article,” Olaf Ransome, who describes himself as a banking expert and founder of 3C Advisory based in Zurich, on LinkedIn. “SWIFT does not pay, it delivers secure messages from one place to another, as FedEx delivers packages and like Jason Statham on Transporter, never opens the package. SWIFT is the wrong lever you have to pull. The list of fines will work better. ”

However, the impact of the announcement is already being felt in some Russian businesses and their customers regardless of who their banks are. “My hotel in Moscow has asked me to pay off my debt early because they are not sure if the credit cards will work out when the SWIFT sanctions start,” NBC News foreign correspondent Raf Sanchez tweeted.

Despite being in the midst of an international media storm, Swift’s Brussels headquarters is still in good shape. On Friday, its PR agency issued a brief statement stating that it is a global nonprofit organization that was established and operated to benefit its community of more than 11,000 financial institutions in 200 countries. “Any decision to impose sanctions on individual countries or companies depends solely on the capacity of the government and the legislatures in place,” the statement read.

Swift has been here before. In 2012, as a result of international action to tighten sanctions against Iran, it was banned from providing financial services to EU-sanctioned Iranian banks, which allegedly caused the country to lose oil exports and 30% of its trade.

The Iranian example shows that cutting off Russian banks in Swift will also have an impact on non-Russian banks and companies outside Russia. Philippe Tissot, a Swiss-based expert on strategy and international business development, says the ban on Russian banks will prevent any other bank from transferring money to Russia, especially to pay for gas purchases and other consumer goods. “Russia supplies gas to several European countries, which can afford Russian gas,” he said. “This decision will also have the effect of significantly increasing the cost of gas globally.”

For those jobs not included in the current list of sanctions imposed on Western countries by Russia, Tissot says their suppliers are still awaiting payment from the Russian Federation. “Crossing Russia to Swift could punish various providers working with Russia in addition to Russia itself,” he explains.

On Twitter, German parliamentarian Norbert Röttgen described SWIFT as “… However, after its takeover of the Crime in 2014, Russia’s largest bank set up another financial messaging network, Financial Transmission System, or SPFS, to passed Swift.

SPFS allows members to send electronic messages about financial transactions. There have been talks to link SPFS with the Cross-Border Inter-Bank Payments System based in China. The cost of trading with SPFS is higher than Swift, Tissot said, but co-operation agreements have already been negotiated with India, Iran and the Eurasian Economic Union. “Accelerating the implementation of this platform could give Russia another solution,” Tissot said.

In addition, many fear that the closure of Swift will significantly encourage Russia, as in other countries, to accelerate the implementation of digital banking and cryptocurrency trading. “The ongoing digital revolution in digital currency will be globalized, and ultimately the biggest loser could be Swift and the US government,” said Tissot, “who could lose his existing ability to arm Swift.”

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